Landscape of home delivery firms changing

TOKYO (The Japan News/ANN) - The competitive business landscape of the home delivery industry, in which service fees have risen due to an ongoing labour shortage, has been changing.

The number of parcels handled by Japan Post Co.’s Yu-Pack service — the fees for which had gone unchanged until the end of February — has been rapidly increasing. Meanwhile, online retailing companies have begun building their own distribution networks.

New systems of home delivery services that utilize information technologies are also gaining attention.

Japan Post Holdings Co. President Masatsugu Nagato said at a press conference on March 28 that even after the fees of Yu-Pack services for individual users were raised in March, “the number of handled parcels has continued increasing.”

He expressed his confidence in the home delivery business of Japan Post Co., a subsidiary of the holding company.

In fiscal 2017, the number of parcels handled by the Yu-Pack service as of February was 796.32 million, much higher than the 632.42 million seen in fiscal 2016, which itself had been the highest ever.

Mainly because of the rapid expansion of online shopping, a driver shortage has grown increasingly serious in the home delivery industry.

Reflecting the rising costs, Yamato Transport Co., the largest firm in the industry, and Sagawa Express Co., the second-largest, raised their delivery fees for individual clients in autumn last year.

Since October, the number of parcels handled by Yamato Transport has been about 1 percent to 10 percent lower than the previous year.

As Yu-Pack fees had been unchanged until the end of February, orders to deliver parcels were diverted to Japan Post from two rivals. Since autumn last year, the number of parcels handled by the Yu-Pack service has been 20 percent to 30 percent higher than the previous year.

As Yu-Pack fees are lower than those of Yamato Transport even after the fee hike in March, the number of parcels handled by Yu-Pack has continued rising.

Outcry from workers

Partly because of the brisk earnings from Yu-Pack, Japan Post Holdings revised upward its consolidated earnings forecast as of the end of March 2018, raising the estimate of net profit by ¥50 billion from the initial forecast to ¥450 billion.

An increase in the work burden on Japan Post employees stemming from the surge in handled parcels is a serious problem.

The company’s delivery workers are decrying the conditions. One said, “I deliver a massive amount of parcels, but my work never ends,” while another said, “It would be horrible if there were even more parcels than there are now.”

In a busy period in December 2017, there was an incident in which the deliveries of about 13,500 parcels were delayed for up to half a day.

As a measure to cope with busy conditions, Japan Post brought forward the deadlines for same-day redelivery requests at post offices nationwide, and swiftly took other actions.

In addition to the delivery fee increase in March, Japan Post reviewed the details of its delivery service.

Japan Post had attempted to deliver parcels again the following day even if recipients did not request redeliveries. However, to reduce the burden of redelivery attempts that failed because of addressees not being in, the company decided to store undelivered parcels in post offices until recipients designate a date and time for redelivery.

Nagato sought public understanding of the new response.

“Manpower in the home delivery industry is facing a dire shortage,” the Japan Post Holding president said.

To secure a sufficient number of delivery workers, working conditions, especially those of nonregular employees, must be urgently improved.

In the 2018 shunto spring labor-management wage negotiations, the Japan Post group decided to increase the bonuses of nonregular employees by 14 percent, on average, and also pay extra wages to them during the New Year holidays similar to those given to regular employees.

In-house distribution networks

In the wake of a series of fee hikes and other changes, a series of major online retailing companies have begun attempts to get out of the current situation in which they rely on major home delivery companies for the distribution of their goods.

Amazon Japan G.K. is building its own distribution network in collaboration with small and midsize delivery companies mainly in urban areas.

Rakuten Inc. announced in January that it plans to build its own distribution network within two years by, for example, increasing its distribution warehouses.

“We’ll specialize in online retailing, and realize lower delivery fees than those of Yamato Transport, Sagawa Express and Japan Post,” said Hiroshi Mikitani, chair and chief executive officer of Rakuten.

To cope with the serious labor shortage, major home delivery companies are speeding up their efforts to utilize artificial intelligence and self-driving technologies.

Yamato Transport is introducing an AI system that indicates the most suitable delivery routes. Until now, each driver has checked parcel slips one by one and then decided on driving routes. Drivers have the AI system read information on parcel slips, and the system then chooses the best driving routes.

The company said that with this system, even new employees and drivers who temporarily take charge of areas they are not familiar with will be able to deliver parcels as efficiently as veteran drivers.

Sagawa Express is developing technology jointly with NTT Data Corp. in which an AI system judges the shapes, sizes and damage conditions of parcels through imaging. The project aims to reduce the burdens on employees by leaving the work of sorting parcels, which is labor-intensive, to robots.

Japan Post aims to transport parcels using self-driving vehicles. The company conducted the first feasibility test for this in Tokyo in March.

In the experiment, fake parcels to be delivered were transported for about two kilometers. However, it will be quite some time before the technology can be put to practical use.

Many companies are turning to AI in the face of the labor shortage.

Because the job of drivers is associated with working long hours, the companies have secured workers by offering higher wages than those in other industries.

However, labor shortages have been spreading to other industries as well, such as construction and service industries, in recent years.

If home delivery companies further raise their wages, costs will rise, which will then be passed on to consumers through raised delivery fees.

It is possible that if the raised costs are passed on via the prices of goods to be delivered, it could result in greater burdens for consumers to shoulder.

“Companies need to make their business operations more efficient by utilizing AI and other new technologies and offer discounts to parcel senders if they cooperate by avoiding the companies’ busy periods,” said Prof. Yuji Yano of Ryutsu Keizai University. “It’s crucial that they tackle the challenges they face by involving the public like that.”